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Figure 8.1 Example of Salesperson Promotion Tiers

The first column in the chart illustrates the salesperson's title at each level. The
second column illustrates the base pay, variable pay, and additional equity earned
at each level. The third column illustrates the criteria necessary to make it to the
next level. According to Figure 8.1, the entry-level sales title is “sales associate.”
To get promoted to the senior sales associate, an entry-level salesperson needs to
accumulate an install base of $60K in monthly recurring revenue (MRR),
acquire an average of $5K new MRR per month, and sign up new customers
with an average of six months paid up front. Once the salesperson's performance
meets these three criteria, she is promoted to senior sales associate. Her quota
increases, but earnings per dollar closed increases as well, resulting in a higher
commission rate and higher OTE. In addition, promoted salespeople receive an
additional 10,000 stock options.

The promotion tiers were a powerful structure within the overall sales
compensation model. Salespeople are competitive, financially motivated, and
always looking to achieve goals. They took these tiers seriously, always looking
to advance to the next level. As a result, the promotion criteria represented
another opportunity for me to align compensation with the desired behaviors I
wanted from our salespeople.

The promotion tiers were also great for culture. We did not have to manage
annual reviews and the often-arbitrary compensation increases. The promotion
tiers took the subjectivity and politics out of this process and empowered the
salespeople to ascend as quickly as they could. Feedback was delivered on a
weekly and monthly basis, and was not reliant on the annual review.

One important observation here was the fact that tenure was not a criterion for